The Cambria freeman. [volume] (Ebensburg, Pa.) 1867-1938, 1887-05-27
NUMBER 10.
SOME WALL STREET TERMS,
HPuts," Calls" "Spreads- and "strac
dies.-These Inventions of MT. Russo
Sage Clearly Explained.

"CailS, spreads and aStrad-
dles."-These Invertions of Mr.. Russell
Sage Clearly Explained.
Russell Sage inve ted puts, /" calls"
"spreads and "straddles He be-
gan dealing in them when he first came
to Wall street in 1861, after his with
orawai from Congress, and he has been
dealing in them ever since; and the
stock markets of the world have taken
up this ingenious speculative device OF
Mr.. Sa5e's and -tocS privileges are lust
as well known on tie Continental bourses
to-day ami in the London market as they
are here, and they are largely dealt in.
London declares that the nomenela-
turt, SO far as spreads" and strad-
dies are concerned, is not refined. and
calls them differently, but what they deal
in are American stock privileges just the
same.
"And what are puts calls
spreads and 'straidles'? asked the
writer when he first went down on Wall
street.
Well" said the confidential clerk of
Russell Sage, of whom the question was
asked, "I'll tell you if you promise
never to mention the poetical subject
again. 1t requires pretty deft wording
to make the thing clear, so it is not an
exhilarating subject to talk on.
You hear great deals about puts
and calls, but l venture to say there
are SO, ,oOO, 900 people in the United States
who do not know what they are, nor
what the meaning is OF the word priv
ileges.'
Now privilege Is a contract by
which the maker of It, Russell Sage.
S. V. White, Jay Gould or Harvey Ken
nedy, engages to purchase from the
holder in the one case, or sell to The
holder in the other case, @ number of
shares of some specified stock, at a GER
tain price, at any time within a certain
period at the option OF the holder Got
that"
"A call is privilege bought of the
maker, at a certain price, and the owner
o. it is privileged to call for certain
amount OF stock at given price, within
thirty, sixty or ninety days, four or six
months.
If a man holds put he has the
right to deliver to the maker Of the
privilege a stock at a certain agreed
price within a certain number of days.
Clear? No. Well, let's try once more.
Suppose Western Union is selling at
40. A man wants a sixty-day put on
1t at &c, because he believes the stock Is
going down. He gives Mr.. Sage, Mr.
White, Mr.. Kennedy or Mr.. Gould l per
cent on the amount of stock he wants to
deal in.
"a hundred shares is usual, and per
cent is 500. He receives in return a
slip OF paper signed by either one or the
other OF these gentlemen Then if
Western Union goes below CO within
sixty days, he may buy it for whatever
II Is selling for below that price, and
put 1t to the maker OF the privilege at
the price agreed on, &c, and receive a
check ior Sc, 600. The holder makes the
difference.
An, you understand.
"If Telegraph does not 60 below 66.
the holder is out his 500.
The = call business operates exactly
IN the opposite way. A man buys the
privilege of calling Western Union at
76, when it is selling at 20. If 1t sells
above 70, you can call on the maker of
the privilege for hundred shares at 20,
and the hundred shares are thus bought
by the holder for 81, 500, and he turns
around and sells it at so if the stock is
selling, there, and pockets the differ
ence."
"what about spreads and 'strad.
dles'?"
"A 'straddle' is put and call
combined. The holder OF one may put
stock TO the maker of the privilege OF
call for it.
- S,raddles come high. because
there is money in them whichever way
the market may so. If the market does
not g at all, but stands still why the
maker is in the money he has been paid
IOl tlle pFiNheSes ABOUT 5 pei
cent, or $500.
a spread is also put and call
combined, but there is this difference, q
'straddle IS made al the market That
is to sGythr maker OF the privilege takes
tho risk that the stock in question does
not move to any extent from the price
at which it is selling when the privilege
is told.
In a spread the maker has more
leeway. II Western Union is selling al
20, to go back to the old illustration, the
maker of the privilege sells a spread
say at 81 and so. If it goes below 81.
the lder can put the stock and make
the difference, and if il goes above so,
the holder can call it at that price and
reap the profits. But so long as the
price of the stock keeps within those
points, the maker of the privilege is
safe.
To put it in another way, the holder
Of a straddle will make if the marke;
for the stock he is dealing in moves at
all. The holder of spread doesn't
make anything until the market moves
past certain limits.
There is one thing more, the maker
of a privilege only receives the money
for which he sells the privilege, while
the holder may make thOusands-ol
nothing.-[N. Y. Mail and Express.